1. 1 WSM Wirtschaftsverband Dipl.-Ing. Ulrich Galladé President Innovations in the steel and metal processing industry – Challenges for medium sized companies and the entire value chain METEC InSteelCon 2007 Düsseldorf, June 12, 2007 Wirtschaftsverband Stahl- und Metallverarbeitung e.V.

2. 2 WSM Wirtschaftsverband Contents Innovations in the steel and metal processing industry – Challenges for medium sized companies and the entire value chain 1. WSM 2. SMEs in Steel Processing Supply Chain 3. Innovations 4. Conclusions

3. 3 WSM Wirtschaftsverband 1. WSM – Market Data Steel and Metal Processing in Germany: 4.600 Companies Family owned Business 410.000 Employees 72 bn. Turnover 24 Associations

4. 4 WSM Wirtschaftsverband 1. WSM – Supply Chain Semi-finished Products and Components End-Products Industrial Service and Treatment www.wsm-net.de

5. 5 WSM Wirtschaftsverband 1. WSM - Diversity e.g. Cold Forging, Cold roll forming, Steel Wire, Iron Wire, Plates, Sheets, Strip Metal, Cold drawn steel, sections e.g. Fasteners, Chains, Springs, Gates, Wire Products, Tanks, Vessels, Sheet metal working, pressed and drawn parts, Powder Metallurgy, tubes e.g. Surface-, Heat-, Hardening- or Mechanical- Treatment

6. 6 WSM Wirtschaftsverband 1. WSM - Core Characteristics Steel and Metal Processing Material Costs up to 60% and above Medium-sized Companies Market Pressure by Supplyers and by Customers Sandwich-Position Politics in favour of SMEs e.g. Innovation Policy for SMEs, International Accounting for SMEs, Energy Policy, Tax Policy, Competition Policy

7. 7 WSM Wirtschaftsverband 7 7 1. WSM - Key Data Companies in Steel and Metal Processing 3.600 3.800 4.000 4.200 4.400 4.600 4.800 5.000 199519961997199819992000200120022003200420052006

8. 8 WSM Wirtschaftsverband 8 8 1. WSM - Key Data Employees in Steel and Metal Processing 340.000 350.000 360.000 370.000 380.000 390.000 400.000 410.000 420.000 199519961997199819992000200120022003200420052006

9. 9 WSM Wirtschaftsverband 0 10.000.000 20.000.000 30.000.000 40.000.000 50.000.000 60.000.000 70.000.000 80.000.000 199519961997199819992000200120022003200420052006 Turnover in Steel and Metal Processing 9 9 WSM Wirtschaftsverband Tsd. 1. WSM - Key Data Ausland Inland

10. 10 WSM Wirtschaftsverband 2. SMEs in Steel Processing Supply Chain EU-Definition of SMEs: 250 employees per company 50 million turnover per company per year Steel and Metal Processing in Germany: 100 employees per company (average) 15,6 million turnover per company per year (average) Family owned business culture

11. 11 WSM Wirtschaftsverband 2. SMEs in Steel Processing Supply Chain Market Pressure Steel Industry as a Supplier highly concentrated in Germany and in Europe Automotive Industry as an important Customer highly concentrated in Germany and in Europe High horizontal Competition from inside Europe and from outside Europe, especially from low cost countries

12. 12 WSM Wirtschaftsverband 2. SMEs in Steel Processing Supply Chain Challenges for SMEs in the supply chain Differentiation from competitors - Excellence in price, in quality, in service Cost-Efficiency Attractive for young academics and skilled personnel Global supply chain management

13. 13 WSM Wirtschaftsverband 3. Innovations SMEs meet many challenges by Innovation Innovations and sustainable quality are means of differentiation, esp. from producers from low cost countries See examples from WSM-publication Innovations – Values - Growth, 2006 Innovations in steel quality and in production process may also reduce costs significantly Innovations attract young academics and skilled personell

14. 14 WSM Wirtschaftsverband 3. Innovations Structures of Innovation in Steel and Metal processing Hardly ever R&D-results from an SMEs own research department only Cooperation – Vertical (with Supply Chain partners) Cooperation – Horizontal (WSM: FSV / GAK) Cooperation – with Universities and Research Labs Exchange of talented Academics / Networks Role of R&D Funds (WSM et al.: AVIF) / R&D State Aid

15. 15 WSM Wirtschaftsverband 3. Innovations Shortcomings of Innovation in Steel and Metal processing Lack of political incentives for transfer of technology Lack of Engineers Lack of Financial Ressources -equity ratio often too low -own innovation not booked as an asset in ballance sheets -revenues often do not cover costs sufficiently -customers often do not pay for innovation and know-how separately Lack of effectiveness in R&D-financial support (bureaucracy)

16. 16 WSM Wirtschaftsverband 3. Innovations Improving Innovation in Steel and Metal processing Steel and Metal processing must be advertised by the whole supply chain as innovative in order to attract young academics - Suppliers must focus on down stream customers demands - Customers must pay adequate prices for innovations / know-how Government should give better incentives for better transfer of technology to more flexible SMEs - Freedom and Competition for Universities / Research Labs - Forschungsprämie: program extension for horizontal research cooperations of SMEs - Develop concept of Universities and Research Labs as non-profit scientific service providers Procedures for R&D-financial support must be better tailored for SMEs and should be less bureaucratic

17. 17 WSM Wirtschaftsverband 4. Conclusions Steel and Metal processing is an innovative sector, characterised by SMEs Innovation is a challenge for the entire Supply / Value Chain Concerted advertisement for innovations in networks Fair pricing Focus on Down Stream Demands Better Regulation: Government must focus on transfer of technology

18. 18 WSM Wirtschaftsverband Dipl.-Ing. Ulrich Galladé President Thank you for your attention! METEC InSteelCon 2007 Düsseldorf, June 12, 2007 Wirtschaftsverband Stahl- und Metallverarbeitung e.V.